74Software (74SW) Q3 2024 TU earnings summary

Executive summary

• Q3 2024 revenue reached €112.4m, up 14.9% organically and 62.1% overall, driven by Axway and the first month of SBS consolidation.

• Nine-month revenue totaled €261.1m, up 7.1% organically and 21.5% overall, with strong contributions from both brands.

• The integration of Axway and SBS began in September, forming a new group with a focus on leveraging synergies and maintaining strong brand identities.

• The group is rebranding to 74Software, preserving Axway and SBS as core brands under the new parent structure, pending shareholder approval in December 2024.

• Both companies have market-leading products, with Axway recognized in the Gartner Magic Quadrant for API management and SBS ranked highly for lending and digital banking solutions.

Financial highlights

• Q3 2024 organic revenue growth was 14.9%, with total revenue of €112.4m; SBS contributed €34.3m for one month.

• Nine-month Axway revenue reached €227m, up from €215m, while consolidated group revenue was €261.1m, up 7.1% organically and 21.5% overall.

• Axway's Annual Recurring Revenue (ARR) at end-September was €235.3m, up 9.4% year-over-year.

• Net debt increased to €236m due to the SBS acquisition, with cash position at €62.1m and new €200m credit facilities secured.

• Free cash flow generation was stronger than expected in Q3, supporting deleveraging efforts.

Outlook and guidance

• Combined group targets €700m revenue for 2025, with 14%-16% profit on operating activities.

• Full-year 2024 revenue target reaffirmed at approximately €460m, with operating margin expected between 13% and 17%.

• Leverage ratio expected to fall below 2x by end of 2025, with a long-term goal of below 1x and free cash flow at 15% of revenue by 2027.

• Organic growth guidance for the group is 2%-4% annually, reflecting the combined business model.

• Q4 pipelines for both Axway and SBS are robust, with no major disruptions anticipated.